On a bright winter morning in Bangalore, founders from 2 startups spent a day at the airport hotel in the restaurant exploring opportunities to collaborate. What they had in common was an ambition to fire FinTech in India though one focused on adoption while the other focused on enablement. What was different about them was that one had funding behind the vision – raised largely from friends & family of the 50-something founders while the other had technical acumen but the 30-something founders had little capital. A year later, while the former team is ready to tee-off the product, the latter has meandered through a long list of boot camps, B-school incubation engines and ‘industry experts’ and are still not close to triggering development.
While the long run success of both of these startups is yet to be established, our friends lost a year looking for money. A look at NASSCOM data shows a similar trend: in 2016 $4 Bn was disbursed; but only 500 of the 5,000+ startups got seed or early stage funding. Making matters worse, there is no discernible trend across regions / domains / target segments. IFCI research highlights a similar deficit only on a larger order of magnitude if you scale the sample to cover non-Technology businesses too: $30 Bn in unfunded equity needs.
With a low mortality rate of ~20%, reasonable M&A activity providing exit path to early investors and a strong domestic consumption story, the writer wonders what’s keeping us from doing more. The numbers are exceptionally appalling especially since there is a recognized needle movement through the concerted effort of Government, Academia, Industry and Media to promote the startup ecosystem. The trouble doesn’t always limit itself since entrepreneurs committed to their vision replace equity with debt, usually more expensive given their lack of bank-worthy credentials.
How do we compare with some others in the world?
In one word: unfavorably. Another word: expectedly.
Where does the problem lie?
While a large part of businesses are structured as proprietorships / partnerships leading to legal challenges, these challenges are easier to manage. The bigger challenge is participation… both from startups and from investors. Lets start with investors: we are severely limited in our base. For VCs, transaction costs make seed and early stage capital funding prohibitive. Angel investing, the more accessible less intrusive access is limited in audience. Where US and UK have 3-6 angel investors for every startup, we have 1 for every 3… a ratio that is 9-10 times poorer if not more.
This is where SAC can help. We are a digital platform designed to help expand the investor base. We believe that the mass affluent wealth class have suboptimal investment options and that startup equity is a compelling portfolio diversification proposition. The real potential of this segment is to get access to 2.5 million households in the country. We also understand what potential investors need to be able to decide to invest. We help startups develop a holistic pitch and connect them with potential investors to engage in free dialogue. Besides capital, the investors bring with them business acumen, a valuable network and an experience that can help your startup succeed.